By mid-March investor
meetings for a sovereign Eurobond (which had to wait until
after the election) were already taking place in London and New
York. Russias second dollar bond in the past 14 years, on
March 28 the triple tranche raised the entirety of
Russias $7 billion budgeted limit for external borrowing
in 2012, and it was hoped it would open the market for other
issuers (arrangers were BNP Paribas, Citi, Deutsche Bank,
Sberbank and VTB Capital).

"In emerging market debt
markets there has been more cash than issuers in the first part
of the year," says Jonathan Brown, head of Europe bond
syndicate at Barclays. "In this region, situations like the
elections in Russia have meant that some issuers that may have
come to the market postponed their plans, meaning issuance in
the second quarter could increase."

Follow the
sovereign

State-owned
Russian Railways priced a new R25 billion ($855 million)
seven-year Eurorouble bond at a yield of 8.3% on March 23
(JPMorgan, RBS and VTB Capital arranged the deal).
Promsvyazbank has mandated Barclays, Citi and Credit Suisse for
a new Eurobond. Russian Railways was similarly expected to
follow the sovereign with a dollar tranche to its
programme.

Vladimir Yakunin,
president of Russian Railways

"Now the political situation in Russia is clear, foreign
investors are more at ease," Vladimir Yakunin, president of
Russian Railways, tells Euromoney during a bond roadshow in
London. "This helps demand and encourages investors but was by
no means a determining factor on timing for us."

With elections over and
the status quo at least temporarily intact, bankers reckon
planned privatizations on the stock market are more likely in
the coming weeks and months. Sources close to the situation say
the central banks postponed sale of a 7.58% stake in
Sberbank could happen as early as April.

"Investment banking in
Russia has been on hold for the best part of the past nine
months because of the elections," says one blanker. "Now Putin
has a mandate from a large proportion of the population. That
gives the government power to get things done. Privatization
will be a key focus as the government tries to attract flows to
the local stock market."

A recovery in Russian
stock valuations in 2012 (partly thanks to eurozone
quantitative easing) has bolstered prospects for sales of state
assets. The central bank said earlier this year that it could
look to sell the Sberbank stake once the share price rose above
R100. This had already happened by late February.

At the end of 2011,
aggregate capital outflows from Russia reached levels not seen
since mid-2009. Partly thanks to the ebb of immediate political
risks, analysts at Barclays now expect capital flight to slow.
This might further encourage bond and debt issuance.

Putin won 64% of the vote
in the presidential election on March 5. Nevertheless, in the
longer term, the consensus among investors is that his position
is less secure following the flaring up of a protest movement
alleging fraud during parliamentary elections in December.

As the government seeks
to allay middle-class frustrations expressed in the protests,
an anti-corruption drive is expected to continue. According to
Barclays research, there might have been a shift in attitudes
towards corruption, signalled by such events as the arrest on
charges of fraud in late February of Anatoly Ballo, deputy
chairman of state development bank VEB.

Yet it remains unclear
whether investigations will touch higher-level officials. And
the anti-corruption drive might not be supportive of capital
inflows, as people fearful of investigation are likely to move
assets abroad.

Economists reckon the
government will continue to pay off middle-class discontent
through increases in pensions and public-sector pay. Although
it is supporting consumer demand, federal budget spending, says
RBS research, already rose 50% and 36% year on year in January
and February, respectively, after having risen 22% year on year
in the final two months of 2011.

The Russian governments budget, according to the
research, is now predicated on an oil price of $117 a barrel.
That is four times higher than the governments breakeven
oil price a decade ago. Despite Putins win, Russias
elite might be brewing up trouble for when oil prices fall, and
investors know it.

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